Cingular eyeing AT&T Wireless again

Negotiations on again

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There is speculation that the long-delayed shake-out in the US wireless services sector could be starting, after reports that US mobile operator Cingular Wireless is again in negotiations with AT&T Wireless Services.

Both companies have been talking to each other off and on since reports of a possible acquisition first surfaced in April 2002. Although there is thought to be no formal offer on the table, negotiations are rumored to have progressed significantly, and the parent organizations of Cingular have supposedly given their backing to fund a purchase.

Cingular is the number-two ranked US wireless operator, while AT&T Wireless occupies the number-three slot. Cingular is particularly interested in AT&T Wireless because of its strong balance sheet and large number of business subscribers. Other carriers are also thought to be keen, including the mobile arm of Deutsche Telekom, T-Mobile.

Cingular is said to have considered an IPO to help fund a deal, but this has been cast aside for now. Instead, Cingular is expected to fund the deal using the cash on its balance sheet, as well as the financial muscle of its two parents, SBC Communications and BellSouth. Cingular would need all the financial backing it could get if the deal were to go through, as AT&T Wireless is thought to have a market capitalization in the region of $23 billion.

The US wireless sector is long overdue for consolidation, and the six national carriers have recently launched aggressive pricing and marketing campaigns to woo each other's customers, as overall subscriber growth in the United States has slowed.